CHICAGO (Reuters) - Illinois' biggest public worker pension fund said on Friday its board gave initial approval to a state contribution of $4.56 billion in fiscal 2018, a 14.5 percent increase over the current fiscal year.
Teachers' Retirement System (TRS) said the higher payment would still fall $2.31 billion below what the state should be contributing to pensions on an actuarial basis.
“By any measure, $4.56 billion is a lot of money, but that amount is a direct product of the perpetual underfunding of TRS by state government over the last 76 years,” TRS Executive Director Dick Ingram said in a statement. “Illinois is reaping what it sowed."
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Illinois' unfunded pension liability stood at $111 billion at the end of fiscal 2015, with TRS accounting for more than 55 percent of that gap. The funded ratio was a weak 41.9 percent.
The huge pension debt, along with a budget impasse that has left the state limping through a second straight fiscal year without a complete budget, have pounded Illinois' credit ratings to the lowest levels among the 50 states.
Illinois officials have been bracing for a pension payment increase after TRS, acting on the advice of its actuary consultant, lowered its assumed long-term investment rate to 7 percent from 7.5 percent in August.
TRS said it will give final approval to a fiscal 2018 payment early next year pending a review and approval of its methodology by the state actuary.
The cash-strapped state's total fiscal 2017 pension payment to its five retirement systems was pegged at $7.9 billion, up from $7.617 billion in fiscal 2016 and $6.9 billion in fiscal 2015, according to a March bipartisan legislative commission report.
TRS has 406,855 members and assets of $45.6 billion as of Sept. 30. Illinois' fiscal year begins July 1.
(Reporting by Karen Pierog; Editing by Matthew Lewis)